Decentralized Applications

What is a D-App?

D-Apps are groups of smart contracts that function together for a purpose. It’s code runs on a decentralized peer-to-peer network, as opposed to running on centralized servers. Bitcoin is an example of a D-App.

There are 4 main characteristics that make up DApps:

Open Source – It should be governed by code that should be made available to the public. Changes are only made by majority consensus.

Decentralized – It should operate on a public blockchain, where all its operations are transparent. It is not owned by any one party.

Incentive System – It should use a cryptographic token as a means of accessing the application, and parties that contribute or secure the network (miners) should be compensated using this cryptocurrency.

Algorithm Consensus – Tokens should be generated by an algorithm agreed upon by the community. This algorithm must prove that nodes are contributing to the network. (Example: Bitcoin uses a Proof of Work algorithm, Ethereum uses a Proof of Stake)

What does all that mean?

In simple language, a D-App is an idea put together using smart contracts, no different than a new business venture put together by shareholders. In this case, however, there are no owners of the business venture, being that it is decentralized, so the would-be ‘shareholders’ hold interest in the venture by owning the cryptocurrency instead – which is used to interact with the app. The concept here is that as the idea develops and grows, more and more people use the D-App, which increases the demand for the currency, thus raising its value.